Abstract
The Black–Scholes GBM model can be generalized to other models that are more realistic for particular markets. The various simple extensions to the Black–Scholes model assume constant parameters for ease of calculation. In reality the properties of time series such as volatility, mean reversion, long-term levels and jump behavior will at the very least vary through time with reasonably predictable patterns. These characteristics can be included in spot models.
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© 2013 Jamie Rogers
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Rogers, J. (2013). Implementing Derivative Models. In: Strategy, Value and Risk. Palgrave Macmillan Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230392687_10
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DOI: https://doi.org/10.1057/9780230392687_10
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